The 21st Century Glass-Steagall Act of 2013 reinstates and updates the Glass-Steagall Act of 1933, which saw core provisions repealed by the Gramm-Leach-Bailey Act of 1999 (GLBA). Senator Elizabeth Warren (D-MA) claims the new bill reduces risk for the American taxpayer and decrease the likelihood of a future financial crisis by “making banking boring again.”

The bill is co-sponsored by John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME).

The four biggest banks are 30 percent larger than in 2008 and continue to gamble with FDIC-insured depositor money on the high-risk, high-reward investment and derivative markets. If something goes wrong, the government has an obligation to step in, essentially absolving risk for the banks.

“If you wanna take risks, do it on Wall Street,” Warren said. “But, don’t do it with deposit money that’s federally insured.”

The original Glass-Steagall Act was enacted following the Great Depression and was largely successful in minimizing risk until federal regulators began reinterpreting laws, allowing limited participation in high risk markets through loopholes.

Financial companies spent more than 20 years and $300 million on lobbying efforts, and according to PBS, Congress attempted to repeal Glass-Steagall 12 times in 25 years.

In 1998, the Federal Reserve granted commercial bank holding company, Citicorp, a temporary waiver allowing a merge with insurance company, Travelers Group. This was based on an assumption that they would be able to force a change in the law and was the final nail in the coffin of Glass-Steagall before it was repealed by GLBA in 1999.

Senator Angus King commented:

“People can always figure out how to outsmart and get around the regulations. The 21st Century Glass-Steagall act creates a structural change in the banking system that would require big banks to break up into smaller institutions in terms of functionality, not size.”

“To ensure that our bill does not succumb to the same fate, we have clarified the regulatory interpretations of those banking law provisions that undermined the original Glass-Steagall,” he added.

While Warren agrees that Glass-Steagall wouldn't have prevented the financial crisis in the first place, it would have made a big difference. The Financial Crisis Inquiry Commission concluded that, leading up to the financial crisis, allowing commercial banks to operate with fewer constraints and to engage in a wider range of financial activities made the financial system especially vulnerable to the crisis and “exacerbated its effects.”

Warren emphasized that the new Glass-Steagall Act is just one piece of what should be done to crack down on banks and will, according to Warren, “stop the game that banks have played for far too long.”

Federal Reserve board member, Daniel Tarullo, argues that the reinstatement of Glass-Steagall would not necessarily address current threats such as the “banks’ reliance on volatile short-term funding markets.”

Other critics, such as Bloomberg writer James Greiff, claim that the Glass-Steagall measures are a waste of time because “taking on deposits and lending for long periods of time is inherently risky,” pointing out that Iceland, Ireland and Spain generated debt bubbles without the help of derivatives or complex securities.

Even though the 21st Century Glass-Steagall Act is unlikely to be signed into law, advocates say it is a step in the right direction and has an opportunity to go further than Dodd-Frank to protect consumers in the financial market.